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FORM 10-K
Securities and Exchange Commission Commission File No. 1-6314
Washington, DC 20549
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(Mark One) [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Act of 1934. For the fiscal year ended December 31, 1998 [ ]Transition Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the transition period from __________ to ____________ Perini Corporation
(Exact name of registrant as specified in its charter)
Massachusetts 04-1717070
(State of Incorporation) (IRS Employer Identification No.)
73 Mt. Wayte Avenue, Framingham, Massachusetts 01701
(Address of principal executive offices) (Zip Code)
(508) 628-2000
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of each exchange on which registered
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Common Stock, $1.00 par value The American Stock Exchange
$2.125 Depositary Convertible Exchangeable The American Stock Exchange
Preferred Shares, each representing 1/10th
Share of $21.25 Convertible Exchangeable
Preferred Stock, $1.00 par value
Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
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The aggregate market value of voting Common Stock held by nonaffiliates of the
registrant is $24,346,000 as of February 22, 1999. The Company does not have any
non-voting Common Stock.
The number of shares of Common Stock, $1.00 par value per share, outstanding at
February 22, 1999 is 5,444,010.
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Documents Incorporated by Reference
Portions of the annual proxy statement for the year ended December 31, 1998 are
incorporated by reference into Part III.
PERINI CORPORATION
INDEX TO ANNUAL REPORT
ON FORM 10-K
PAGE
----
PART I
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Item 1: Business 2 - 11
Item 2: Properties 11
Item 3: Legal Proceedings 12
Item 4: Submission of Matters to a Vote of Security Holders 12
PART II
Item 5: Market for the Registrant's Common Stock and Related 12
Stockholder Matters
Item 6: Selected Financial Data 13
Item 7: Management's Discussion and Analysis of Financial 14 - 20
Condition and Results of Operations
Item 7A: Quantitative and Qualitative Disclosure About Market Risk 20
Item 8: Financial Statements and Supplementary Data 20
Item 9: Disagreements on Accounting and Financial Disclosure 20
PART III
Item 10: Directors and Executive Officers of the Registrant 21 - 22
Item 11: Executive Compensation 22
Item 12: Security Ownership of Certain Beneficial Owners and 22
Management
Item 13: Certain Relationships and Related Transactions 22
PART IV
Item 14: Exhibits, Financial Statement Schedules and Reports on 23
Form 8-K
Signatures 24
1
PART I.
ITEM 1. BUSINESS
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General
Perini Corporation and its subsidiaries (the "Company" unless the context
indicates otherwise) provides general contracting, including building and civil
construction, and construction management and design-build services to private
clients and public agencies throughout the United States and selected overseas
locations. The Company is also engaged in real estate development operations
which are conducted by Perini Land & Development Company, a wholly-owned
subsidiary with offices currently in Georgia and Massachusetts. The Company was
incorporated in 1918 as a successor to businesses which had been engaged in
providing construction services since 1894.
Because the Company's results consist in part of a limited number of large
transactions in both construction and real estate, results in any given fiscal
quarter can vary depending on the timing of transactions and the profitability
of the projects being reported. As a consequence, quarterly results may reflect
such variations.
Information on lines of business and foreign business is included under the
following captions of this Annual Report on Form 10-K for the year ended
December 31, 1998.
Annual Report
On Form 10-K
Caption Page Number
------- -----------
Selected Consolidated Financial Information Page 13
Management's Discussion and Analysis Pages 14 - 20
Note 13 to the Consolidated Financial Statements, entitled Business Segments Pages 48 - 50
While the "Selected Consolidated Financial Information" presents certain lines
of business information for purposes of consistency of presentation for the five
years ended December 31, 1998, additional information (business segment)
required by Statement of Financial Accounting Standards No. 131, "Disclosures
About Segements of an Enterprise and Related Information", for the three years
ended December 31, 1998 is included in Note 13 to the Consolidated Financial
Statements.
A summary of revenues by business segment for the three years ended December 31,
1998 is as follows:
Revenues (in thousands)
Year Ended December 31,
----------------------------------------
1998 1997 1996
---- ---- ----
Construction:
Building $ 679,296 $ 888,809 $ 834,888
Civil 332,026 387,224 389,540
------------ ---------- ------------
Total Construction Revenues $ 1,011,322 $1,276,033 $ 1,224,428
Real Estate 24,578 48,458 45,856
------------ ---------- ------------
Total Revenues $ 1,035,900 $1,324,491 $ 1,270,284
============ ========== ============
2
Construction
The general contracting services provided by the Company consist of planning and
scheduling the manpower, equipment, materials and subcontractors required for
the timely completion of a project in accordance with the terms and
specifications contained in a construction contract. The Company provides these
services using the traditional contracting method as well as under construction
management or design-build contracting arrangements. The Company was engaged in
over 130 construction projects in the United States and overseas during 1998.
The Company has two principal construction operations: building and civil.
The building operation provides its services through regional offices located in
several metropolitan areas: Boston, serving New England and the Mid-Atlantic
area; and Phoenix and Las Vegas, serving Arizona, Nevada and California. In
1992, the Company combined its building operations into a wholly-owned
subsidiary, Perini Building Company, Inc. This company combines substantial
resources and expertise to better serve clients within the building construction
market and enhances Perini's name recognition in this market. The Company
undertakes a broad range of building construction projects including hotels,
casinos, health care, correctional facilities, sports complexes, residential,
commercial, civic, cultural and educational facilities.
The civil operation undertakes large public civil projects in the East, with
current emphasis on major metropolitan areas such as Boston and New York City
and selectively, in other geographic locations. The civil operation performs
construction and rehabilitation of highways, subways, tunnels, dams, bridges,
airports, marine projects, piers and waste water treatment facilities. The
Company has been active in civil operations since 1894, and believes that it has
particular expertise in large and complex projects. The Company believes that
infrastructure rehabilitation is, and will continue to be, a significant market
in 1999 and beyond.
Perini Management Services, Inc. (formerly Perini International Corporation), a
wholly-owned subsidiary, provides a broad range of both civil and building
construction services to U.S. government agencies in the U.S. and selected
overseas locations, funded primarily in U.S. dollars. In selected situations, it
pursues other work internationally.
Construction Strategy
The Company's current strategy is to concentrate on the civil construction
market in the East and specialized niche building construction markets
throughout the United States, with the goal in both markets to improve profit
margins. The Company believes the best opportunities for growth in the coming
years for its civil construction business are in the urban infrastructure
market, particularly in Boston and metropolitan New York and other major cities
where it has a significant presence, and in other large, complex projects. The
Company's strategy in building construction is to take advantage of certain
market niches, and to expand into new markets compatible with its expertise.
Internally, the Company plans to continue to improve efficiency through strict
attention to the control of overhead expenses and implementation of improved
project management systems. Finally, the Company continues to expand its
expertise to assist public owners to develop necessary facilities through
creative public/private ventures.
During 1996, the Company also adopted a plan to enhance the profitability of its
construction operations by emphasizing gross margin and bottom line improvement
ahead of top line revenue growth. This plan called for the Company to focus its
financial and human resources on construction operations which are consistently
profitable and to de-emphasize marginal business units. During 1997, the Company
closed or downsized and refocused four business units and combined its two
remaining civil construction entities (U.S. Heavy and Metropolitan New York
divisions) under a consolidated management structure named "Perini Civil".
During 1998, the Company continued its plan to enhance profitability and to
implement certain other decisions made in 1997 by closing down two marginal
business units in the Midwest.
3
Backlog
As of December 31, 1998, the Company's construction backlog was $1.23 billion
compared to backlogs of $1.31 billion and $1.52 billion as of December 31, 1997
and 1996, respectively.
Backlog (in thousands) as of December 31,
-----------------------------------------------------------------------------------------
1998 1997 1996
---- ---- ----
Northeast $ 682,774 55% $ 574,779 44% $ 643,114 42%
Mid-Atlantic 45,417 4 97,212 7 113,289 8
Southeast 35,801 3 46,629 4 56,925 4
Midwest 92,928 8 26,130 2 97,954 6
Southwest 294,931 24 481,068 37 425,901 28
West 26,843 2 28,707 2 139,079 9
Foreign 53,562 4 54,929 4 41,438 3
Total $1,232,256 100% $1,309,454 100% $1,517,700 100%
The Company includes a construction project in its backlog at such time as a
contract is awarded or a firm letter of commitment is obtained. As a result, the
backlog figures are firm, subject only to the cancellation provisions contained
in the various contracts. The Company estimates that approximately $500 million
of its backlog will not be completed in 1999.
The Company's backlog in the Northeast region of the United States continues to
remain strong because of its ability to meet the needs of the growing
infrastructure construction and rehabilitation market in this region,
(particularly in the metropolitan Boston and New York City areas). The decrease
in backlog in the Southwest region is due to the timing in signing new contracts
that are being negotiated rather than a longer term trend. Other fluctuations in
backlog are viewed by management as transitory.
Types of Contracts
The four general types of contracts in current use in the construction industry
are:
O Fixed price contracts ("FP"), which include fixed unit price contracts,
usually transfer more risk to the contractor but offer the opportunity,
under favorable circumstances, for greater profits. With the Company's
concentration in publicly bid civil construction projects, fixed price
contracts continue to represent the major portion of the backlog.
O Cost-plus-fixed-fee or award fee contracts ("CPFF") which provide
greater safety for the contractor from a financial standpoint, but limit
profits.
O Guaranteed maximum price contracts ("GMP") which provide for a
cost-plus-fee arrangement up to a maximum agreed price. These contracts
place risks on the contractor, but may permit an opportunity for greater
profits than cost-plus-fixed-fee contracts through sharing agreements
with the client on any cost savings.
O Construction management contracts ("CM") under which a contractor agrees
to manage a project for the owner for an agreed-upon fee which may be
fixed or may vary based upon negotiated factors. The contractor
generally provides services to supervise and coordinate the construction
work on a project, but does not directly purchase contract materials,
provide construction labor and equipment or enter into agreements with
subcontractors.
4
Historically, a high percentage of company contracts have been of the fixed
price and GMP type contracts. Construction management contracts remain a
relatively small percentage of company contracts. A summary of revenues and
backlog by type of contract for the most recent three years follows:
Revenues - Year Ended
December 31, Backlog As Of December 31,
- ----------------------------------- -------------------------------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
50% 58% 59% Fixed Price 68% 53% 62%
50 42 41 CPFF, GMP or CM 32 47 38
---- ---- ---- ---- ---- ----
100% 100% 100% 100% 100% 100%
Clients
During 1998, the Company was active in the building, civil and international
construction markets. The Company performed work for over 100 federal, state and
local governmental agencies or authorities and private customers during 1998.
Due to the Company's trend toward fewer, but larger contracts, a material part
of the Company's business has been dependent on a single or limited number of
private customers and/or public agencies in recent years (see Note 13 to Notes
to the Consolidated Financial Statements), the loss of any one of which could
have a materially adverse effect on the Company. During the period 1996-1998,
the portion of construction revenues derived from contracts with various
governmental agencies was 43% in 1998, 51% in 1997 and 52% in 1996.
Revenues by Client Source
Year Ended December 31,
-----------------------------------
1998 1997 1996
---- ---- ----
Private Owners 57% 49% 48%
Federal Governmental Agencies 2 5 5
State, Local and Foreign Governments 41 46 47
---- ---- ----
100% 100% 100%
General
The construction business is highly competitive. Competition is based primarily
on price, reputation for on time completion, quality, reliability and financial
strength of the contractor. While the Company experiences a great deal of
competition from other large general contractors, some of which may be larger
with greater financial resources than the Company, as well as from a number of
smaller local contractors, it believes it has sufficient technical, managerial
and financial resources to be competitive in each of its major market areas.
The Company will endeavor to spread the financial and/or operational risk, as it
has from time to time in the past, by participating in construction joint
ventures, both in a majority and in a minority position, for the purpose of
bidding and if awarded, performing on projects. These joint ventures are
generally based on a standard joint venture agreement whereby each of the joint
venture participants is usually committed to supply a predetermined percentage
of capital, as required, and to share in the same predetermined percentage of
income or loss of the project. Although joint ventures tend to spread the risk
of loss, the Company's initial obligations to the venture may increase if one of
the other participants is financially unable to bear its portion of cost and
expenses. For an example of this situation, see "Legal Proceedings" on page 12.
For further information regarding certain joint ventures, see Note 2 to Notes to
Consolidated Financial Statements.
While the Company's construction business may experience some adverse
consequences if shortages develop or if prices for materials, labor or equipment
increase excessively, provisions in certain types of contracts often shift all
or a major portion of any adverse impact to the customer. On fixed price type
contracts, the Company attempts to insulate
5
itself from the unfavorable effects of inflation by incorporating escalating
wage and price assumptions, where appropriate, into its construction bids.
Gasoline, diesel fuel and other materials used in the Company's construction
activities are generally available locally from multiple sources and have been
in adequate supply during recent years. Construction work in selected overseas
areas primarily employs expatriate and local labor which can usually be obtained
as required. The Company does not anticipate any significant impact in 1999 from
material and/or labor shortages or price increases.
Economic and demographic trends tend not to have a material impact on the
Company's civil construction operation. Instead, the Company's civil
construction markets are dependent on the amount of heavy civil infrastructure
work funded by various governmental agencies which, in turn, may depend on the
condition of the existing infrastructure or the need for new expanded
infrastructure. The building markets in which the Company participates are
dependent on economic and demographic trends, as well as governmental policy
decisions as they impact the specific geographic markets.
The Company has minimal exposure to environmental liability as a result of the
activities of Perini Environmental Services, Inc. ("Perini Environmental"), a
wholly-owned subsidiary of the Company that was phased out during 1997. Perini
Environmental provided hazardous waste engineering and construction services to
both private clients and public agencies nationwide. Perini Environmental was
responsible for compliance with applicable laws in connection with its clean up
activities and bore the risk associated with handling such materials. In
addition to strict procedural guidelines for conduct of this work, the Company
and Perini Environmental generally carried insurance or received satisfactory
indemnification from customers to cover the risks associated with this business.
The Company also owns real estate in seven states and as an owner, is subject to
laws governing environmental responsibility and liability based on ownership.
The Company is not aware of any environmental liability associated with its
ownership of real estate property.
The Company has been subjected to a number of claims from former employees of
subcontractors regarding exposure to asbestos on the Company's projects. None of
the claims have been material. The Company also operates construction machinery
in its business and will, depending on the project or the ease of access to fuel
for such machinery, install fuel tanks for use on-site. Such tanks run the risk
of leaking hazardous fluids into the environment. The Company, however, is not
aware of any emissions associated with such tanks or of any other significant
environmental liability associated with its construction operations or any of
its corporate activities.
Progress on projects in certain areas may be delayed by weather conditions
depending on the type of project, stage of completion and severity of the
weather. Such delays, if they occur, may result in more volatile quarterly
operating results due to less progress than anticipated being achieved on
projects.
In the normal course of business, the Company periodically evaluates its
existing construction markets and seeks to identify any growing markets where it
feels it has the expertise and management capability to successfully compete or
withdraw from markets which are no longer economically attractive, which it did
during 1997 with two construction divisions in the Midwest and Perini
Environmental referred to above.
Real Estate
The Company's real estate development operations are conducted by Perini Land &
Development Company ("PL&D"), a wholly-owned subsidiary, which has been involved
in real estate development since the early 1950's. PL&D has most recently
engaged in real estate development in Arizona, California, Florida, Georgia and
Massachusetts.
In late 1996, PL&D changed its strategy on certain of its properties from
maximizing value by holding them through the necessary development and
stabilization periods to a new strategy of generating short-term liquidity
through an accelerated disposition or bulk sale. This change in strategy
substantially reduced the estimated future cash flow from these properties.
Therefore, an impairment loss on those properties resulted in PL&D recording a
non-cash charge in an aggregate amount of approximately $80 million as of
December 31, 1996, in accordance with Statement of Financial
6
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of". An estimated allocation of
the write-down, by geographic areas, was California ($59 million), Arizona ($18
million), and Florida ($3 million).
Since January 1, 1998, in its capacity as managing general partner of Rincon
Center Associates ("RCA"), a joint venture which owns Rincon Center, a mixed-use
property in San Francisco (see Real Estate Properties below), PL&D reached a
nonbinding agreement on the restructure of the existing financing and other
obligations on the project, subject to final documentation and final approval of
several parties. The agreement provides, among other things, that the joint
venture give up all of its economic interest in Phase I of Rincon Center. Once
the refinancing agreement is completed, all guarantees provided by RCA, its
partners and the Company, under the existing master lease covering Rincon I,
would be released at that time in connection with the termination of the master
lease. In anticipation of the completion of this transaction, a reserve of $17.2
million against the potential write-off of a note receivable and other assets
related to the Phase I portion of the project was taken by RCA at December 31,
1997. PL&D's share of that reserve was $7.8 million, which was charged against
existing reserves it carries on the project. Based on a current net realizable
value analysis, the Company's investment in RCA will be recoverable from the
full development and disposition of the remaining phase of the property
identified as Rincon II.
PL&D will continue periodically to review its portfolio to assess the
desirability of accelerating its sales through price concessions or sale at an
earlier stage of development. In circumstances in which asset strategies are
changed, such as in 1997 and 1996, and properties brought to market on an
accelerated basis, those assets, if necessary, are adjusted to reflect the lower
of carrying amounts or fair value less cost to sell. Similarly, if the long term
outlook for a property in development or held for future sale is adversely
changed, the Company will adjust its carrying value to reflect such an
impairment in value.
To achieve full value for some of its real estate holdings, in particular its
investments in Rincon Center, PL&D may have to hold that property several years
and currently intends to do so.
Real Estate Strategy
Since 1990, PL&D has taken a number of steps to reduce the size of its
operations. In early 1990, all new real estate investment was suspended pending
market improvement, all but critical capital expenditures were curtailed on on-
going projects, and PL&D's work force was substantially reduced. Certain project
loans were extended, with such extensions usually requiring pay downs and
increased annual amortization of the remaining loan balance. Since that time,
PL&D has operated with a further reduced staff and has adjusted its activity to
meet the demands of the market. PL&D currently has offices in Georgia and
Massachusetts.
PL&D's real estate development project mix includes planned community,
industrial park, commercial office, multi-unit residential, urban mixed use and
single family home developments. PL&D's emphasis is on the sale of completed
product and also developing the projects in its inventory with the highest near
term sales potential.
Real Estate Properties
The following is a description of the Company's major development projects and
properties by geographic area:
Florida
West Palm Beach and Palm Beach County - At Metrocentre, a 51-acre
commercial/office park which provides for 570,500 square feet of mixed
commercial uses at the intersection of Interstate 95 and 45th Street in West
Palm Beach, no property was sold in 1998. The park consists of 17 parcels, of
which 5 acres currently remain unsold.
7
Massachusetts
Perini Land & Development or Paramount Development Associates, Inc.
("Paramount"), a wholly-owned subsidiary of PL&D, own the following projects:
Raynham Woods Commerce Center, Raynham - In 1987, Paramount acquired a 409-acre
site located in Raynham, Massachusetts. During 1988, Paramount completed
infrastructure work on a major portion of the site (330 acres) which is being
developed as a mixed-use corporate campus style park known as "Raynham Woods
Commerce Center". From 1989 through 1997, Paramount sold an aggregate of 58
acres to various users, including the division of a major U.S. company for use
as its headquarters, to a developer who was working with a major national
retailer for a retail site, and to a major insurance company. In 1990, Paramount
built two commercial buildings in the park. The park is planned to eventually
contain 2.5 million square feet of office, R&D, light industrial and mixed
commercial space. Two land sales totalling 8 acres were closed in 1998, along
with the sale of the two commercial buildings mentioned above, leaving
approximately 160 saleable acres to be sold.
Easton Business Center, Easton - In 1989, Paramount acquired a 40-acre site in
Easton, Massachusetts, which already had been partially developed. Paramount
completed the work and is currently marketing the site to commercial/industrial
users. No sales were closed in 1998.
Wareham - In early 1990, Paramount acquired an 18.9-acre parcel of land at the
junction of Routes 495 and 58 in Wareham, Massachusetts. The property is being
marketed to both retail and commercial/industrial users. No sales were closed in
1998.
Georgia
The Villages at Lake Ridge, Clayton County - During 1987, PL&D (49%) entered
into a joint venture with 138 Joint Venture Partners to develop a 348-acre
planned commercial and residential community in Clayton County called "The
Villages at Lake Ridge," six miles south of Atlanta's Hartsfield International
Airport. The development plan calls for mixed residential densities of
apartments and moderate priced single-family homes totaling 1,158 dwelling units
in the residential tracts, plus 220,000 square feet of retail and 220,000 square
feet of office space in the commercial tracts. Since its acquisition, the joint
venture has put in a substantial portion of the infrastructure, all of the
recreational amenities, and through 1997 had sold 312 single family lots to
builders, along with a 22.3-acre tract designed for 88 lots, a 16-acre parcel
for use as an elementary school and developed a 278-unit apartment complex which
it later sold to a third party buyer. In 1998 the joint venture sold an
additional 24 lots and a 5.6-acre tract designed for 16 lots to builders.
California
Rincon Center, San Francisco - Major construction on this mixed-use project in
downtown San Francisco was completed in 1989 for Rincon Center Associates, a
joint venture in which PL&D holds a 46% interest and is the managing general
partner. The project, constructed in two phases, consists of 320 residential
units, approximately 423,000 square feet of office space, 63,000 square feet of
retail space, and a 700-space parking garage. Following its completion in 1988,
the first phase of the project was sold and leased backed under a master lease
by the developing partnership. The first phase, referred to as Rincon I,
consists of about 223,000 square feet of office space and 42,000 square feet of
retail space. The Rincon I office space is 100% leased with the regional
telephone directory company as the major tenant on a lease which runs to 2002.
The retail space is currently 100% leased. Phase II of the project, referred to
as Rincon II, which began operations in late 1989, consists of approximately
200,000 square feet of office space, 21,000 square feet of retail space, a
14,000-square foot U.S. postal facility, and 320 apartment units. Currently, 95%
of the office space, 100% of the retail space and 97% of the 320 residential
units are leased. The major tenant in the office space in Rincon II is a large
national insurance company which occupies 164,000 square feet. The land related
to this project is being leased from the U.S. Postal Service under a ground
lease which expires in 2050.
Two major loans on this property, in aggregate totaling over $75 million, were
scheduled to mature in 1993.
8
During 1993, both loans were extended for five additional years. To extend these
loans, PL&D provided approximately $6 million in new funds which were used to
reduce the principal balances of the loans. Between 1993 and 1998, PL&D has
continued to provide funding used to further amortize these loans. Both loans,
which currently aggregate $48.3 million, matured in 1998 and were not refinanced
pending the debt restructure referred to below. In late 1997, as part of the
agreement to extend the letter of credit which supports the tax exempt bonds,
PL&D allowed the lender to call the $3.65 million letter of credit provided as
support for the Rincon II commercial loan. RCA, the lessor, and the lender have
reached a nonbinding agreement on the restructure of the Rincon financing. The
agreement is subject to final documentation and final approvals of several
parties including the lessor and the Company's revolving credit facility banks.
The portion of the agreement relating to Rincon I provides, among other things,
that the joint venture give up all of its economic interest in the commercial
and retail segments of that portion of the property identified as Rincon I, and
that the joint venture make a one-time payment of $7.5 million to the lessor of
Rincon I (which includes a final loan payment of $6.5 million to the lenders of
Rincon I). The agreement would also release the joint venture from all future
liabilities under the master lease, including the obligation to repurchase that
segment of the property under certain conditions. The portion of the agreement
relating to Rincon II provides for, among other things, a $1.5 million interest
payment, a $2.8 million principal payment, amortization of the commercial loan
of $20,000 per month, a new letter of credit in the amount of $2.0 million
issued to secure the remaining borrowings at Rincon II and the elimination of
further Company or joint venture guarantees.
Total restructure payments related to Rincon I and II are estimated to be $12.7
million through 1999, of which $5.3 million will be funded by the Company and
$7.4 million will be funded by the other co-general partner of the joint
venture.
As part of the Rincon Center Phase I sale and operating lease-back transaction,
the lease provides that if an additional financial commitment to replace at
least $33 million of long-term financing (refers to one of the loans mentioned
above) has not been arranged by January 1, 1998, the lessee will be deemed to
have made an offer to purchase the property for a stipulated amount of
approximately $18.8 million in excess of the then outstanding debt. An
arrangement has been made to delay this event to allow the parties to finalize
the financial restructuring as described above and to eventually cancel this
requirement as part of the terms to the various restructuring agreements.
In addition to the project financing and guarantees mentioned above and
described in more detail in Note 11 to Notes to Consolidated Financial
Statements, the Company has advanced approximately $92.5 million to the
partnership through December 31, 1998, of which approximately $3.3 million was
advanced during 1998, primarily to pay down some of the principal portion of
project debt which was renegotiated during 1993. During 1993 PL&D agreed, if
necessary, to lend Pacific Gateway Properties (PGP), the other General Partner
in the project, funds to meet its 20% share of cash calls. In return, PL&D
receives a priority return from the partnership on those funds and penalty fees
in the form of rights to certain distributions due PGP by the partnership
controlling Rincon. From 1993-1998, PL&D advanced $6.2 million under this
agreement, primarily to meet the principal payment obligations of the loan
extensions described above. These funds, advanced as loans to PGP, are in
addition to the advances described above.
Corte Madera, Marin County - After many years of intensive planning, PL&D
obtained approval for a 151 single-family home residential development on its
85-acre site in Corte Madera and, in 1991, was successful in gaining water
rights for the property. In 1992, PL&D initiated development on the site which
was continued into 1993. This development is one of the last remaining in-fill
areas in southern Marin County. In 1993, when PL&D decided to scale back its
operations in California, it also decided to sell this development in a
transaction which closed in early 1994. The transaction calls for PL&D to get
the majority of its funds from the sale of residential units or upon the sixth
anniversary of the sale whichever takes place first, and, although indemnified,
to leave in place certain bonds and other assurances previously given to the
town of Corte Madera guaranteeing performance in compliance with approvals
previously obtained. Sale of the units began in August of 1995 and by the end of
1997, 76 sales were closed. During 1998, another 54 sales were closed, leaving a
balance of 21 lots remaining.
9
Arizona
Perini Central Limited Partnership, Phoenix - In 1985, PL&D (75%) entered into a
joint venture with the Central United Methodist Church to master plan and
develop approximately 4.4 acres of the church's property in midtown Phoenix. In
1990, the project was successfully rezoned to permit development of 580,000
square feet of office, 37,000 square feet of retail and 162 luxury apartments.
In early 1998, the Company entered into a preliminary agreement to sell the
property which was terminated late in 1998. Negotiations for the sale of the
property to another prospective buyer are currently in process.
Grove at Black Canyon, Phoenix - The project consists of an office park complex
on a 30-acre site located off of Black Canyon Freeway, a major Phoenix artery,
approximately 20 minutes from downtown Phoenix. When complete, the project will
include approximately 650,000 square feet of office, hotel, restaurant and/or
retail space. Development, which began in 1986, is scheduled to proceed in
phases as market conditions dictate. In 1987, a 150,000-square foot office
building was completed within the park. The building leased up immediately and
maintained an average occupancy in the low 90% range until late 1997. The
building is now 75% leased with approximately half of the building leased to a
major area utility company. During 1993, PL&D (50%) successfully restructured
the financing on the project by obtaining a seven year extension with some
amortization and a lower fixed interest rate. The annual amortization commitment
is not currently covered by operating cash flow. In the near term, it appears
approximately $700,000 per year of support to cover loan amortization will
continue to be required. In 1996, the lease covering space occupied by the major
office tenant was extended an additional seven years to the year 2004 on
competitive terms. In 1995, a day care center was completed on an 8-acre site
along the north entrance of the park. In 1997, a 1.5-acre site was sold to a
local small business for development of an owner occupied office building and a
2.7-acre site was sold to a national hotel chain for development of an
all-suites hotel. Both projects are completed and operating.
During the latter part of 1998, a judgment was rendered against the joint
venture which required payment of a portion of a note, related interest and
expenses which could aggregate between $1 and 2 million. The joint venture and
its counsel are in the process of reviewing the possibility of appealing the
decision.
Sabino Springs Country Club, Tucson - During 1990, the Tucson Board of
Supervisors unanimously approved a plan for this 410-acre residential golf
course community close to the foothills on the east side of Tucson. In 1991,
that approval, which had been challenged, was affirmed by the Arizona Supreme
Court. When fully developed, the project will consist of 496 single-family
homes. In 1993, PL&D recorded the master plat on the project and sold a major
portion of the property to an international real estate company. An 18-hole
Robert Trent Jones, Jr. designed championship golf course and clubhouse were
completed within the project in 1995. In 1998, PL&D settled a lawsuit with the
prior purchaser of the major portion of the property which required PL&D to
complete a certain portion of the infrastructure by the end of the Year 2000.
Although it will require some additional infrastructure development before sale,
PL&D still retains 33 estate lots for sale in future years.
General
The Company's real estate business is influenced by both economic conditions and
demographic trends. A depressed economy may result in lower real estate values
and longer absorption periods. Higher inflation rates may increase the values of
current properties, but often are accompanied by higher interest rates which may
result in a slow down in property sales because of higher carrying costs.
Important demographic trends are population and employment growth. A significant
reduction in either of these may result in lower real estate prices and longer
absorption periods.
Generally, there has been no material impact on PL&D's real estate development
operations over the past 10 years due to interest rate increases. However, an
extreme and prolonged rise in interest rates could create market resistance for
all real estate operations in general, and is always a potential market
obstacle. Historically, PL&D has, in some cases, employed hedges or caps to
protect itself against increases in interest rates on any of its variable rate
debt. The future use of such hedges or caps is somewhat restricted under the
terms of the New Credit Agreement.
Because several of the Company's real estate projects have been written down to
net realizable value, future
10
gross profits from real estate sales will be minimal, which has been the case
during the three year period ended December 31, 1998.
Insurance and Bonding
All of the Company's properties and equipment, both directly owned or owned
through partnerships or joint ventures with others, are covered by insurance,
and management believes that such insurance is adequate.
In conjunction with its construction business, the Company is often required to
provide various types of surety bonds. The Company has a co-surety arrangement
with three sureties, one of which it has dealt with for over 75 years, and it
has never been refused a bond. Although from time-to-time the surety industry
encounters limitations affecting the bondability of very large projects and the
Company occasionally has encountered limits imposed by its surety, these limits
have not had an adverse impact on its operations.
Employees
The total number of personnel employed by the Company is subject to seasonal
fluctuations, the volume of construction in progress and the relative amount of
work performed by subcontractors. During 1998, the maximum number of employees
employed was approximately 2,700 and the minimum was approximately 1,600.
The Company operates as a union contractor. As such, it is a signatory to
numerous local and regional collective bargaining agreements, both directly and
through trade associations, throughout the country. These agreements cover all
necessary union crafts and are subject to various renewal dates. Estimated
amounts for wage escalation related to the expiration of union contracts are
included in the Company's bids on various projects and, as a result, the
expiration of any union contract in the current fiscal year is not expected to
have any material impact on the Company.
ITEM 2. PROPERTIES
- -------------------
Properties applicable to the Company's real estate development activities are
described in detail by geographic area in Item 1. Business on pages 6 through
10. All other properties used in operations are summarized below:
Owned or Leased Approximate Approximate Square
Principal Offices by Perini Acres Feet of Office Space
- ----------------- --------- ----- --------------------
Framingham, MA Owned 9 100,000
Phoenix, AZ Leased - 22,700
Hawthorne, NY Leased - 12,500
Atlantic City, NJ Leased - 900
Las Vegas, NV Leased - 2,900
Atlanta, GA Leased - 200
Chicago, IL Leased - 1,600
Detroit, MI Leased - 2,800
----- -------
9 143,600
Owned or Leased Approximate
Principal Permanent Storage Yards by Perini Acres
- --------------------------------- --------- -----
Bow, NH Owned 70
Framingham, MA Owned 6
Las Vegas, NV Leased 2
-----
78
=====
11
The Company's properties are generally well maintained, in good condition,
adequate and suitable for the Company's purpose and fully utilized.
ITEM 3. LEGAL PROCEEDINGS
- --------------------------
As previously reported, the Company is a party to an action entitled Mergentime
Corporation et. al. v. Washington Metropolitan Transit Authority v. Insurance
Company of North America (Civil Action No. 89-1055) in the U.S. District Court
for the District of Columbia. The action involves WMATA's termination of the
general contractor, a joint venture in which the Company was a minority partner,
on two contracts to construct a portion of the Washington, D.C. subway system,
and certain claims by the joint venture against WMATA for claimed delays and
extra work.
On July 30, 1993, the Court upheld the termination for default, and found both
joint venturers and their surety jointly and severally liable to WMATA for
damages in the amount of $16.5 million, consisting primarily of WMATA's excess
reprocurement costs, but specifically deferred ruling on the amount of the joint
venture's claims against WMATA. Since the other joint venture partner may be
unable to meet its financial obligations under the award, the Company could be
liable for the entire amount.
At the direction of the sucessor judge presiding over the action, during the
third quarter of 1995, the parties submitted briefs on the issue of WMATA's
liability on the joint venture's claims for delays and for extra work. As a
result of that process, the company established a reserve with respect to the
litigation.
In July 1997, the remaining issues were ruled on by the sucessor Judge, who
awarded approximately $4.3 million to the joint venture, thereby reducing the
net amount payable to approximately $12.2 million. The joint venture appealed
the decision. As a result of the decision, there was no immediate impact on the
Company's Statement of Operations because of the reserve provided in prior
years. The actual funding of net damages, if any, will be deferred until the
litigation process is complete.
On February 16, 1999, the U.S. Court of Appeals for the District of Columbia
vacated the April 1995 and July 1997 Orders and remanded the case back to the
successor judge with instructions for the successor judge to consider certain
post-trial motions to the same extent an original judge would have, and to make
findings and conclusions regarding the unresolved issues, giving appropriate
consideration to whether or not witnesses must be recalled. A final judgment
will be entered by the District Court upon the completion of these Appeals
Court-directed procedures.
In the ordinary course of its construction business, the Company is engaged in
other lawsuits, arbitration and alternative dispute resolution ("ADR")
proceedings. The Company believes that such proceedings are usually unavoidable
in major construction operations and that their resolution will not materially
affect its results of future operations and financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
None.
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
- -------------------------------------------------------------------------
MATTERS
- -------
The Company's Common Stock is traded on the American Stock Exchange under the
symbol "PCR". The quarterly market price ranges (high-low) for 1998 and 1997 are
summarized below:
1998 1997
---- ----
Market Price Range per Common Share: High Low High Low
- ------------------------------------ ---- --- ---- ---
Quarter Ended
March 31 9 1/8 - 7 3/8 9 1/2 - 6 7/8
June 30 11 1/4 - 7 7/8 7 3/4 - 6 1/4
September 30 8 1/2 - 6 8 3/8 - 7
December 31 7 - 4 1/4 9 3/8 - 7 13/16
12
For information on dividend payments, see Selected Financial Data in Item 6
below and "Dividends" under Management's Discussion and Analysis in Item 7
below.
As of February 22, 1999, there were approximately 1,144 record holders of the
Company's Common Stock.
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
Selected Consolidated Financial Information
(In thousands, except per share data)
OPERATING SUMMARY 1998 1997 1996 1995 1994
------------- ------------ ------------ ------------ -------------
Revenues:
Construction Operations -
Building $ 679,296 $ 888,809 $ 834,888 $ 748,412 $ 626,391
Civil 332,026 387,224 389,540 308,261 324,493
------------- ------------ ------------ ------------ -------------
$ 1,011,322 $ 1,276,033 $ 1,224,428 $ 1,056,673 $ 950,884
Real Estate Operations 24,578 48,458 45,856 44,395 61,161
------------- ------------ ------------ ------------ -------------
Total Revenues $ 1,035,900 $ 1,324,491 $ 1,270,284 $ 1,101,068 $ 1,012,045
------------- ------------ ------------ ------------ -------------
Costs:
Cost of Operations $ 984,871 $ 1,275,614 $ 1,215,806 $ 1,086,213 $ 960,248
Write down of Certain Real Estate
Assets (Note 4) - - 79,900 - -
------------- ------------ ------------ ------------ -------------
$ 984,871 $ 1,275,614 $ 1,295,706 $ 1,086,213 $ 960,248
------------- ------------ ------------ ------------ -------------
Gross Profit (Loss) $ 51,029 $ 48,877 $ (25,422) $ 14,855 $ 51,797
General, Administrative & Selling
Expenses 28,780 30,556 33,988 37,283 42,985
------------- ------------ ------------ ------------ -------------
Income (Loss) From Operations $ 22,249 $ 18,321 $ (59,410) $ (22,428) $ 8,812
Other Income (Expense), Net (812) (1,665) (492) 814 (856)
Interest Expense (8,685) (10,334) (9,871) (8,582) (7,473)
------------- ------------ ------------ ------------ -------------
Income (Loss) Before Income Taxes $ 12,752 $ 6,322 $ (69,773) $ (30,196) $ 483
(Provision) Credit for Income Taxes (1,100) (950) (830) 2,611 (180)
------------- ------------ ------------ ------------ -------------
Net Income (Loss) $ 11,652 $ 5,372 $ (70,603) $ (27,585) $ 303
------------- ------------ ------------ ------------ -------------
Per Share of Common Stock:
Basic and diluted earnings (loss) $ 1.08 $ 0.01 $ (15.13) $ (6.38) $ (0.42)
------------- ------------ ------------ ------------ -------------
Cash dividends declared $ - $ - $ - $ - $ -
------------- ------------ ------------ ------------ -------------
Book value $ 4.17 $ 2.44 $ 2.14 $ 17.06 $ 23.79
------------- ------------ ------------- ------------ -------------
Weighted Average Number of
Common Shares Outstanding 5,318 5,059 4,808 4,655 4,380
------------- ------------ ------------ ------------ -------------
FINANCIAL POSITION SUMMARY
Working Capital $ 57,665 $ 76,752 $ 56,744 $ 36,545 $ 29,948
------------- ------------ ------------ ------------ -------------
Current Ratio 1.29:1 1.33:1 1.19:1 1.12:1 1.13:1
------------- ------------ ------------ ------------ -------------
Long-term Debt, less current
maturities $ 75,857 $ 84,898 $ 96,893 $ 84,155 $ 76,986
------------- ------------ ------------ ------------ -------------
Stockholders' Equity $ 50,558 $ 40,900 $ 35,558 $ 105,606 $ 132,029
------------- ------------ ------------ ------------ -------------
Ratio of Long-term Debt to Equity 1.50:1 2.08:1 2.72:1 .80:1 .58:1
------------- ------------ ------------ ------------ -------------
Total Assets $ 378,591 $ 414,924 $ 464,292 $ 539,251 $ 482,500
------------- ------------ ------------ ------------ -------------
OTHER DATA
Backlog at Year End $ 1,232,256 $ 1,309,454 $ 1,517,700 $ 1,534,522 $ 1,538,779
------------- ------------ ------------ ------------ -------------
13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------------------------------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
Results of Operations -
1998 Compared to 1997
The Company's total operations produced net income of $11.7 million (or $1.08
per Common Share) in 1998 compared to net income of $5.4 million (or $.01 per
Common Share) in 1997. This substantially improved performance is attributable
to higher margins on the work performed by both the Company's building and civil
operating units, primarily from the hotel/casino market in Nevada and from civil
infrastructure work in the Northeast and further reductions in general and
administrative and interest expense. These improvements more than offset a
decrease in 1998 construction revenues and continued losses from real estate
operations.
Revenues decreased $288.6 million (or 22%) from $1,324.5 million in 1997 to
$1,035.9 million in 1998. This decrease resulted from a decrease in construction
revenues of $264.7 million (or 21%) from $1,276.0 million in 1997 to $1,011.3
million in 1998, due primarily from a decrease in revenues from both building
and civil construction operations. Revenues from building operations decreased
$209.5 million (or 24%) from $888.8 million in 1997 to $679.3 million in 1998,
due primarily to the timing of the start up of new hotel/casino projects in Las
Vegas, a decrease in revenues from airport facilities and a sports complex in
the West, and a decrease in revenues from correctional facilities projects in
the East. Revenues from civil construction operations decreased $55.2 million
(or 14%) from $387.2 million in 1997 to $332.0 million in 1998, due primarily to
the timing in the start up of new work in the Northeast. The phasing out of two
divisions in the Midwest also contributed to the decrease in revenues from both
the building and civil operations. The decline in real estate revenues of $23.9
million (or 49%) is primarily due to the non-recurring revenues related to the
1997 sale of the Company's interest in the Resort at Squaw Creek.
In spite of the overall 22% decrease in total revenues described above, total
gross profit actually increased by $2.1 million (or 4%), from $48.9 million in
1997 to $51.0 million in 1998, due primarily to improved margins on both the
building and civil construction work performed in 1998. Real estate operations
contributed a gross loss of $2.7 million, a $1.4 million increase over 1997
which was caused primarily by adverse operating results in Arizona.
The decrease in general, administrative and selling expenses of $1.8 million (or
5.9%) from $30.6 million in 1997 to $28.8 million in 1998, resulted primarily
from phasing out of two construction divisions in the Midwest, efficiencies
achieved by combining certain other divisions and continuation of downsizing
certain corporate departments.
Other income (expense), net improved by $0.9 million from a net expense of $1.7
million in 1997 to a net expense of $0.8 million in 1998, due to an increase in
interest income and a decrease in bank fees.
Interest expense decreased by $1.6 million from $10.3 million in 1997 to $8.7
million in 1998, due primarily to lower average levels of borrowing during 1998.
The lower than normal tax rate for the three year period ended December 31, 1998
is due to the utilization of tax loss carryforwards from prior years. Because of
certain accounting limitations, the Company was not able to recognize a portion
of the tax benefit related to the operating losses experienced in fiscal 1996
and 1995. As a result, an amount estimated to be approximately $59.0 million of
pretax earnings subsequent to 1998 should benefit from minimal, if any, federal
tax charges. The net deferred tax assets reflect management's estimate of the
amount that will, more likely than not, be realized (see Note 5 to Notes to
Consolidated Financial Statements).
Results of Operations -
1997 Compared to 1996
The Company's total operations resulted in net income of $5.4 million (or $.01
per Common Share) in 1997 compared to a net loss of $70.6 million (or $15.13 per
Common Share) in 1996. The improvement in 1997 results compared to 1996 is
substantially due to the non-recurring non-cash write-down in 1996 related to a
change in the Company's real estate strategy for certain properties from
maximizing value by holding them through the necessary development and
14
stabilization periods to a new strategy of generating short-term liquidity
through an accelerated disposition or bulk sale (see Notes 1(d) and 4 to Notes
to Consolidated Financial Statements).
Revenues amounted to $1.324 billion in 1997, a record level for the third
consecutive year, an increase of $54.2 million (or 4.3%), compared to 1996
revenues of $1.270 billion. This increase resulted primarily from increased
construction revenues of $51.6 million (or 4.2%) from $1.224 billion in 1996 to
$1.276 billion in 1997, due primarily to an increase in revenues from building
construction operations of $53.9 million (or 6.5%), from $834.9 million in 1996
to $888.8 million in 1997, which more than offset a slight decrease in revenues
from civil construction operations of $2.3 million (or 0.6%), from $389.5
million in 1996 to $387.2 million in 1997. These revenue fluctuations reflect
the timing in the start-up of new construction projects, in particular several
fast track hotel/casino projects in the Southwestern United States, several
prison/detention and medical facilities projects in the Northeastern United
States, and several long-term infrastructure rehabilitation projects in the
metropolitan New York, Boston and Los Angeles areas. Revenues from real estate
operations increased $2.6 million from $45.9 million in 1996 to $48.5 million in
1997, because of revenues related to the sale of the Company's interest in The
Resort at Squaw Creek.
Gross profit increased by $74.3 million, from a loss of $25.4 million in 1996 to
a profit of $48.9 million in 1997 due to the 1996 non-recurring $79.9 million
real estate write-down. After adjusting for the 1996 real estate write-down, the
pro forma gross profit actually decreased by $5.6 million in 1997, from $54.5
million in 1996 to $48.9 million in 1997, in spite of the increase in revenues
described above, due primarily to a $5.2 million decrease in gross profit from
construction operations, from $55.4 million in 1996 to $50.2 million in 1997
because the increased profits related to the increase in construction revenues
was more than offset by additional write-downs related to contracts from two
unprofitable Midwest construction divisions, which are being closed. The impact
of these write-downs were partially offset by an approximate $3.2 million gain
from the sale of the Company's interest in two joint ventures (see Note 14 to
Notes to the Consolidated Financial Statements). The gross loss from real estate
operations was $1.3 million in 1997 compared to an adjusted gross loss of $0.9
million in 1996.
General, administrative and selling expenses decreased by $3.4 million (or 10%),
from $34.0 million in 1996 to $30.6 million in 1997 primarily due to the closing
out of two construction divisions in the Midwest and Perini Environmental
Services, Inc., its wholly-owned hazardous waste subsidiary.
Other income (expense), net increased $1.2 million, from a net expense of $0.5
million in 1996 to a net expense of $1.7 million in 1997 due primarily to
increased amortization of deferred debt expense related to the new credit
agreement, a $0.4 million decrease in gains on sales of fixed assets, and a $0.3
million decrease in minority interest.
Interest expense increased by $0.4 million (or 4%), from $9.9 million in 1996 to
$10.3 million in 1997 due to a higher average level of borrowings during 1997.
Financial Condition
Cash and Working Capital
During 1998, cash generated from operating activities in the amount of $29.7
million, due primarily to changes in various elements of working capital,
continued to reflect improvement over recent years. In addition, net cash
provided from investing activities amounted to $0.3 million which was generated
by net cash distributions to the Company from joint ventures. The funds
generated were used for financing activities ($14.8 million) to pay down
borrowings and to increase cash on hand by $15.2 million.
During 1997, the Company generated $12.7 million in cash from operating
activities, primarily from proceeds related to the sale of The Resort at Squaw
Creek, and $14.6 million in cash from financing transactions, due to the net
proceeds received on the sale of Series B Preferred Stock less pay downs of
long-term debt. These funds were used for investing activities ($5.7 million)
primarily for joint ventures and to increase the cash on hand by $21.6 million.
During 1996, the Company used $23.4 million in cash for operating activities,
primarily for changes in working capital, and $22.0 million for investment
activities, primarily to fund construction and real estate joint ventures. These
uses of
15
cash were provided by $26.1 million from financing activities, primarily
increases in borrowings under the Company's Revolving Credit and Bridge Loan
facilities, and a $19.3 million reduction in cash on hand.
Since 1990, the Company has paid down $50.0 million of real estate debt on
wholly-owned real estate projects (from $50.9 million to $0.9 million),
utilizing proceeds from sales of property and general corporate funds.
Similarly, real estate joint venture debt has been reduced by $171.0 million
over the same period. As a result, the Company has reached a point at which
revenues from further real estate sales that, in the past, have been largely
used to retire real estate debt will be increasingly available to improve
general corporate liquidity subject to certain restrictions contained in the New
Credit Agreement referred to in Note 3 to Notes to Consolidated Financial
Statements. With the exception of a major property (Rincon Center) referred to
in Note 11 to Notes to Consolidated Financial Statements, this trend should
continue over the next few years with debt on projects often being fully repaid
prior to full project sell-out. In addition, the Company made a strategic
decision in the early 1990's to change its mix of construction work by
increasing the relative percentage of potentially higher margin civil
construction projects. The working capital required to support civil
construction projects is substantially more than the normal building
construction project because of its equipment intensive nature, progress billing
terms imposed by certain public owners and, in some instances, time required to
process contract change orders. The Company has addressed these problems by
relying on corporate borrowings, extending certain maturing real estate loans
(with such extensions usually requiring pay downs and increased annual
amortization of the remaining loan balance), suspending the acquisition of new
real estate inventory, significantly reducing development expenses on certain
projects, utilizing stock in payment of certain expenses, utilizing cash
internally generated from operations and selling its interest in certain
engineering and construction business units that were not an integral part of
the Company's ongoing building and civil construction operations. The Company
also implemented company-wide cost reduction programs in the early 1990's, and
which are ongoing, to improve long-term financial results and suspended the
dividend on its Common Stock during the fourth quarter of 1990 and suspended
payment of dividends on its $21.25 Convertible Exchangeable Preferred Stock in
the first quarter of 1996.
Effective January 17, 1997, the Company's liquidity and access to future
borrowings, as required, during the next few years were significantly enhanced
by the issuance of $30 million in Redeemable Series B Cumulative Convertible
Preferred Stock (see Note 7 to Notes to Consolidated Financial Statements) and
the New Credit Agreement referred to in Note 3 to Notes to Consolidated
Financial Statements. The aggregate amount available under its revolving credit
agreement increased to $129.5 million at that time, although it has subsequently
been reduced and stands at $96.6 million at December 31, 1998. In addition to
internally generated funds, at December 31, 1998, the Company has $21.6 million
available under its revolving credit facility. The financial covenants to which
the Company is subject include minimum levels of working capital, debt/net worth
ratio, net worth level, interest coverage and certain restrictions on real
estate investments, all as defined in the loan documents. Although the Company
would have been in violation of certain of the covenants during 1998, it
obtained waivers of such violations. Also, during 1997 and 1998, the Company
made substantial progress on a strategy adopted at the end of 1996 that called
for liquidating certain real estate assets which were written down at that time,
resolving several major construction claims and minimizing overhead expenses.
The working capital current ratio was 1.29:1 at the end of 1998 compared to
1.33:1 at the end of 1997, and 1.19:1 at the end of 1996. Of the total working
capital of $57.7 million at the end of 1998, approximately $17.6 million may not
be converted to cash within the next 12 to 18 months.
Long-term Debt
Long-term debt was $75.9 million at the end of 1998 and continued to decrease
during the period under review, $9.0 million during 1998 and $12.0 million
during 1997. The ratio of long-term debt to equity improved substantially during
this same period to 1.50:1 at the end of 1998 from 2.08:1 and 2.72:1 at the end
of 1997 and 1996, respectively. The improvement in the debt to equity ratio is
due primarily to a combination of the Company continuing to pay down its
long-term debt and to earnings recorded in both 1998 and 1997.
Stockholders' Equity
The Company's book value per Common Share stood at $4.17 at December 31, 1998,
compared to $2.44 per Common Share and $2.14 per Common Share at the end of 1997
and 1996, respectively. The major factors impacting
16
stockholders' equity during the three-year period under review were the net
income recorded in 1998 and 1997, the net loss recorded in 1996 and, to a lesser
extent, Preferred dividends paid in-kind or accrued and stock issued in partial
payment of certain expenses.
At December 31, 1998, there were 1,146 Common stockholders of record based on
the stockholders list maintained by the Company's transfer agent.
Dividends
There were no cash dividends declared or paid on the Company's outstanding
Common Stock during the three years ended December 31, 1998.
During 1995, the Company declared and paid the regular quarterly cash dividends
of $5.3125 per share on the Company's Convertible Exchangeable Preferred Shares
for an annual total of $21.25 per share (equivalent to quarterly dividends of
$.53125 per Depositary Share for an annual total of $2.125 per Depositary
Share). In conjunction with the covenants of the 1995 Amended Revolving Credit
Agreement (see Note 3 to Notes to Consolidated Financial Statements), the
Company was required to suspend the payment of quarterly dividends on its
Preferred Stock. Therefore, the dividend that normally would have been declared
during December of 1995 and payable on March 15, 1996, as well as subsequent
quarterly dividends in 1996, 1997 and 1998, have not been declared or paid
(although they have been fully accrued due to the "cumulative" feature of the
Preferred Stock). A New Credit Agreement, superseding the loan agreements
referred to above, was approved January 17, 1997 and provides that the Company
may not pay cash dividends or make other restricted payments unless: (i) the
Company is not in default under the New Credit Agreement; (ii) commitments under
the credit facility have been reduced to less than $90 million; (iii) restricted
payments in any quarter, when added to restricted payments made in the prior
three quarters, do not exceed fifty percent (50%) of net income from continuing
operations for the prior four quarters; and (iv) net worth (after taking into
consideration the amount of the proposed cash dividend or restricted payment) is
at least equal to the amount shown below, adjusted for non-cash charges incurred
in connection with any disposition or write-down of any real estate investment,
provided that net worth must be at least $60 million:
Net Worth
---------
(In thousands)
October 1, 1998 to December 30, 1998 $161,977
December 31, 1998 to March 31, 1999 $167,303
April 1, 1999 to June 30, 1999 $170,129
July 1, 1999 to September 30, 1999 $172,955
October 1, 1999 to January 1, 2000 $175,781
For purposes of the New Credit Agreement, net worth shall include the net
proceeds from the sale of the Series B Preferred Stock to the Investors. In
addition, under the terms of the Series B Preferred Stock, the Company may not
pay any cash dividends on its Common Stock until after September 1, 2001, and
then only to the extent such dividends do not exceed in aggregate more than
twenty-five percent (25%) of the Company's consolidated net income available for
distribution to Common shareholders (after Preferred dividends). Prior to any
such dividends, the Company must have elected and paid cash dividends on the
Series B Preferred Stock for the preceding four quarters.
The aggregate amount of dividends in arrears is approximately $6,906,000 at
December 31, 1998, which represents approximately $69.06 per share of Preferred
Stock or approximately $6.91 per Depositary Share and is included in "Other
Liabilities" (long-term) in the Consolidated Balance Sheet. Under the terms of
the Preferred Stock, the holders of the Depositary Shares are entitled to elect
two additional Directors since dividends had been deferred for more than six
quarters and they did so at the May 14, 1998 Annual Meeting.
The Board of Directors intends to resume payment of dividends when the Company
satisfies the terms of the New Credit Agreement, the provisions of the Series B
Preferred Stock and the Board deems it prudent to do so.
17
Outlook
O Construction - Looking ahead, the overall construction backlog at the
end of 1998 was $1.232 billion, down 6% from the 1997 year end backlog
of $1.309 billion. This decrease primarily reflects a timing lag in
signing up new work under negotiation at December 31, 1998 and
suspension of work acquisition in certain divisions that are being
closed. This backlog has a good balance between building and civil work
and a relatively high overall estimated profit margin. Approximately 47%
of the current backlog relates to building construction projects which
generally represent lower risk, lower margin work, and approximately 53%
of the current backlog relates to civil construction projects which
generally represent higher risk, but correspondingly potentially higher
margin work. During 1996, the Company also adopted a plan to enhance the
profitability of its construction operations by emphasizing gross margin
and bottom line improvement ahead of top line revenue growth. This plan
called for the Company to focus its financial and human resources on
construction operations which are consistently profitable and to de-
emphasize marginal business units. Consistent with that Plan, the
Company implemented plans to close or downsize and refocus four business
units during 1997 and during 1998 it continued to implement these plans.
The Company believes the outlook for its building and civil construction
businesses continues to be promising.
O Real Estate - Because several of the Company's real estate projects have
been written down to net realizable value, future gross profits from
real estate sales will be minimal, which has been the case during the
three year period ended December 31, 1998. A major objective for 1999 is
to finalize the renegotiation and extension of debt at Rincon Center
(see Note 11 to Notes to Consolidated Financial Statements).
O Liquidity - With the receipt of $30 million from the sale of its
Redeemable Series B Preferred Stock and the New Credit Agreement both
becoming effective on January 17, 1997, the Company's near term
liquidity position improved substantially, enabling payments to vendors
to generally be made in accordance with normal payment terms. In order
to generate cash and reduce the Company's dependence on bank debt to
fund the working capital needs of its core construction operations as
well as to lower the Company's substantial interest expense and
strengthen the balance sheet in the longer term, the Company will
continue to sell certain real estate assets as market opportunities
present themselves; to actively pursue the favorable conclusion of
various unapproved change orders and construction claims; to focus new
construction work acquisition efforts on various niche markets and
geographic areas where the Company has a proven history of success; to
downsize or close operations with marginal prospects for success; to
continue to restrict the payment of cash dividends on the Company's $1
par value Common Stock and $2.125 Depositary Convertible Exchangeable
Preferred Stock; and to continue to seek ways to control overhead
expenses. In addition, at the end of 1996, the Company completed a
review of all of its real estate assets which resulted in a change of
strategies related to certain of those assets to a new strategy of
generating short-term liquidity.
Subsequent to December 31, 1998, the Company reached an agreement in
principle with its Bank Group to extend its Revolving Credit Facility
for an additional year from the beginning of the Year 2000 to the
beginning of 2001 (see Note 3 to Notes to the Consolidated Financial
Statements).
Management believes that cash generated from operations, existing credit
lines, additional borrowings and projected sale of certain real estate
assets referred to above and timely resolution and payment of various
unapproved change orders and construction claims referred to above
should be adequate to meet the Company's funding requirements for at
least the next twelve months.
O Year 2000 Disclosure - Since many computers, related software and
certain devices with embedded microchips record only the last two digits
of a year, they may not be able to recognize that January 1, 2000 (or
subsequent dates) comes after December 31, 1999. This situation could
cause erroneous calculations or system shutdowns, causing problems that
could range from merely inconvenient to significant.
18
As previously reported, the Company began a project to review all of its
computer systems in 1995. One factor, among many to consider, was what
impact, if any, Year 2000 would have on computer systems. As a result of
this project, the Company implemented new, fully integrated, online,
construction specific financial systems during the first quarter of 1998
which are Year 2000 compliant. The cost of these new systems, including
the hardware which is also Year 2000 compliant, software and
implementation costs, approximated $1.5 million which was capitalized
and is being amortized over ten years on a straight-line basis.
The Company recognized that the Year 2000 issue could be an overall
business problem, not just a technical problem. Therefore, it
established a Year 2000 Committee early in 1998 to identify all of the
other potential Year 2000 issues that could impact the Company,
including readiness issues for its computer applications and business
processes, non-information technology systems such as those of its
facilities and equipment, along with relationships with third parties,
such as its customers, vendors, subcontractors, joint venture, and other
business partners; develop plans to evaluate the significance of the
potential problem; develop plans to remedy or minimize the potential
problem; assign appropriate resources; and monitor the implementation of
the plans. During the third quarter of 1998, the Committee, which
included both the Company's Chairman and CEO, designated the Year 2000
Project Manager. The Project Manager has organized a Year 2000 Team,
consisting of specific individuals assigned from each operating unit and
each corporate department. In addition, the Company developed, published
and commenced implementation of its Year 2000 Readiness Plan which has
as its overall objective "to eliminate or minimize the potential
internal and external impact of the Year 2000 issue on the normal
business operations of the Company, its subsidiaries, and joint ventures
in a timely and cost effective manner". In addition to addressing its
own computer applications, facilities, and construction equipment, the
Plan includes communication with critical third parties as stated above.
The Year 2000 Plan includes the following phases: (1) potential problem
identification, (2) resource commitment, (3) inventory, (4) assessment,
(5) prioritization, (6) remediation, and (7) testing. While the Company
completed the problem identification and resource commitment phases
during the third quarter, and prioritization phase during the fourth
quarter of 1998, it is in various stages of "inventory", "assessment",
"testing", and "remediation" phases as of December 31, 1998. As part of
the Plan, the Company is evaluating alternative solutions and developing
contingency plans for handling certain critical areas in the event
remediation is unsuccessful. Completion of the Year 2000 Plan, including
final testing and development of final contingency plans, is currently
on schedule and should be completed by its October 1999 targeted
completion date. The Company currently estimates that costs related to
the Year 2000 Plan over and above the cost of the new financial systems
referred to above will approximate $0.3 million which are being expensed
currently.
The Company, as a general contractor, generally provides its
construction services in accordance with detailed contracts and
specifications provided by its clients. Also, the Company recently
installed all new mission critical financial system software on new
hardware, all of which are Year 2000 compliant. In light of the above,
the Company has defined its most reasonable likely worse case scenario
at this stage of implementing its Year 2000 Plan to include last minute
inquiries and requests for assistance in determining Year 2000
compliance by some limited number of clients who have not properly
prepared for this event. In addition, the possible filing of frivolous
lawsuits against the Company, among others, by a party or parties that
claim they were adversely impacted by a Year 2000 issue related to one
of the many projects with which the Company was associated is also a
concern. The Company currently plans to have a Year 2000 Urgent Response
Team defined and available to respond to last minute Year 2000 issues
raised by clients or others in a timely, proactive and cost effective
manner. In addition, the Company currently plans to develop prepackaged
legal defenses in advance assuming various types of complaints.
Forward-looking Statements
This Management's Discussion and Analysis of Financial Condition and Results of
Operations, including "Outlook",
19
"Year 2000 Disclosure" and other sections of this Annual Report, contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including
statements that are based on current expectations, estimates and projections
about the industries in which the Company operates, management's beliefs and
assumptions made by management. Words such as "expects", "anticipates",
"intends", "plans", "believes", "seeks", "estimates", variations of such words
and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and
involve certain risks, uncertainties and assumptions which are difficult to
predict. Therefore, actual outcomes and results may differ materially from those
in such forward-looking statements. The Company undertakes no obligation to
update publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
- -------------------------------------------------------------------
The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's revolving credit debt (see Note 3 to Notes to the
Consolidated Financial Statements) and short-term investment portfolio. As of
December 31, 1998, the Company had $72.0 million borrowed under its revolving
credit agreement that is classified in long-term debt and $38.2 million of
short-term investments classified as cash equivalents.
The Company borrows under its bank revolving credit facility for general
corporate purposes, including working capital requirements and capital
expenditures. Borrowings under the bank credit facility bear interest at the
applicable LIBOR or base rate, as defined, and therefore, the Company is subject
to fluctuations in interest rates. If the average effective 1998 borrowing rate
of 8.0% changed by 10% (or 0.8%) during the next twelve months, the impact,
based on the Company's ending 1998 revolving debt balance, would be an increase
or decrease in net income and cash flow of $576,000.
The Company's short-term investment portfolio consists primarily of highly
liquid instruments with maturities of less than one month.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
The Reports of Independent Public Accountants, Consolidated Financial
Statements, and Supplementary Schedules, are set forth on the pages that follow
in this Report and are hereby incorporated herein.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
- -------------------------------------------------------------
None.
20
PART III.
---------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
-----------------------------------------------------------
Reference is made to the information to be set forth in the section entitled
"Election of Directors" in the definitive proxy statement involving election of
directors in connection with the Annual Meeting of Stockholders to be held on
May 13, 1999 (the "Proxy Statement"), which section is incorporated herein by
reference. The Proxy Statement will be filed with the Securities and Exchange
Commission not later than 120 days after December 31, 1998 pursuant to
Regulation 14A of the Securities and Exchange Act of 1934, as amended.
Listed below are the names, offices held, ages and business experience of all
executive officers of the Company.
Name, Offices Held and Age Year First Elected to Present Office
and Business Experience
- -------------------------- ------------------------------------
David B. Perini, Director and Since January 1, 1998 he serves as a
Chairman - 61* Director and Chairman. Prior to that,
he served as a Director, President,
Chief Executive Officer and Acting
Chairman since 1972. He became
Chairman on March 17, 1978 and has
worked for the Company since 1962 in
various capacities. Prior to being
elected President, he served as Vice
President and General Counsel.
Ronald N. Tutor, Director and Vice Since January 1, 1998 he serves as a
Chairman - 58* Director and Vice Chairman. Prior to
that,he served as a Director and
Acting Chief Operating Officer since
January 17, 1997. He is the Chairman,
President and Chief Executive Officer
of Tutor-Saliba Corporation, a
California based construction
contractor since prior to 1994 and
has actively managed that company
since 1966.
Roger J. Ludlam, Director, President He was elected President and Chief
and Chief Executive Officer - 56* Executive Officer effective January
1, 1998 and has served as a Director
since May 1998. Prior to that, he
served as Senior Vice President,
Civil Construction since June 1997.
Prior thereto, he served as Chief
Executive Officer of Park
Construction, a Minnesota based civil
construction contractor since January
1994 and in a similar capacity for S.
J. Groves & Sons Company since 1989.
Robert Band, Executive Vice President, He was elected to his current
Chief Financial Officer - 51 position in December 1997. Prior to
that, he served as President of
Perini Management Services, Inc.
since January 1996 and as Senior Vice
President, Chief Operating Officer of
Perini International Corporation
since April 1995. Previously, he
served as Vice President Construction
from July 1993 and in various
operating and financial capacities
since 1973, including Treasurer from
May 1988 to January 1990.
*Effective January 31, 1999, Mr. Ludlam resigned as President and Chief
Executive Officer of the Company. Since January 31, 1999, David B. Perini and
Ronald N. Tutor have shared the responsibilities of President and Chief
Executive Officer of the Company pending the appointment of a new Chief
Executive Officer.
The Company's officers are elected on an annual basis at the Board of Directors
Meeting immediately following the Shareholders Meeting in May, to hold such
offices until the Board of Directors Meeting following the next Annual Meeting
of Shareholders and until their respective successors have been duly appointed
or until their tenure has been terminated by the Board of Directors, or
otherwise.
21
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
In response to Items 11-13, reference is made to the information to be set forth
in the section entitled "Election of Directors" in the Proxy Statement, which is
incorporated herein by reference.
22
PART IV.
--------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
------------------------------------------------------------------------
PERINI CORPORATION AND SUBSIDIARIES
-----------------------------------
(a)1. The following financial statements and supplementary financial
information are filed as part of this report:
Pages
-----
Financial Statements of the Registrant
Consolidated Balance Sheets as of December 31, 1998 and 1997 25 - 26
Consolidated Statements of Operations for each of the three years ended December 31, 1998, 1997 27
and 1996
Consolidated Statements of Stockholders' Equity for each of the three years ended December 31, 28
1998, 1997 and 1996
Consolidated Statements of Cash Flows for each of the three years ended December 31, 1998, 1997 29 - 30
and 1996
Notes to Consolidated Financial Statements 31 - 51
Report of Independent Public Accountants 52
(a)2. The following financial statement schedules are filed as part of this report:
Pages
-----
Report of Independent Public Accountants on Schedules 53
Schedule I -- Condensed Financial Information of Registrant 54 - 59
Schedule II -- Valuation and Qualifying Accounts and Reserves 60
All other schedules are omitted because of the absence of the conditions
under which they are required or because the required information is
included in the Consolidated Financial Statements or in the Notes
thereto.
(a)3. Exhibits
The exhibits which are filed with this report or which are incorporated
herein by reference are set forth in the Exhibit Index which appears on
pages 61 through 65. The Company will furnish a copy of any exhibit not
included herewith to any holder of the Company's Common and Preferred
Stock upon request.
(b) During the quarter ended December 31, 1998, the Registrant made no
filings on Form 8-K.
23
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, hereunto duly authorized.
Perini Corporation
(Registrant)
Dated: March 15, 1999 /s/David B. Perini
David B. Perini
Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Company and in
the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
(i) Principal Executive Officer
David B. Perini Chairman March 15, 1999
/s/David B. Perini
------------------
David B. Perini
(ii) Principal Financial Officer
Robert Band Executive Vice President,
Chief Financial Officer March 15, 1999
/s/Robert Band
--------------
Robert Band
(iii) Principal Accounting Officer
Barry R. Blake Vice President and
Controller March 15, 1999
/s/Barry R. Blake
-----------------
Barry R. Blake
(iv) Directors
David B. Perini )
Richard J. Boushka )
Arthur I. Caplan )
Marshall M. Criser )
Frederick Doppelt )/s/ David B. Perini
Albert A. Dorman ) David B. Perini
Arthur J. Fox, Jr. )
Nancy Hawthorne )Attorney in Fact
Michael R. Klein )Dated: March 15, 1999
Douglas J. McCarron )
John J. McHale )
Jane E. Newman )
Ronald N. Tutor )
24
Consolidated Balance Sheets
December 31, 1998 and 1997
(In thousands except share data)
Assets
1998 1997
------------- -------------
CURRENT ASSETS:
Cash, including cash equivalents of $38,175 and $23,585 (Note 1) $ 46,507 $ 31,305
Accounts and notes receivable, including retainage of $30,450 and $54,234 113,855 139,221
Unbilled work (Note 1) 19,585 36,574
Construction joint ventures (Notes 1 and 2) 67,100 71,056
Real estate inventory, at the lower of cost or market (Notes 1 and 4) 10,069 25,145
Deferred tax asset (Notes 1 and 5) 1,076 1,067
Other current assets 1,332 1,808
------------- -------------
Total current assets $ 259,524 $ 306,176
------------- -------------
REAL ESTATE DEVELOPMENT INVESTMENTS (Notes 1 and 4):
Land held for sale or development (including land development costs) at
the lower of cost or market $ 15,541 $ 7,093
Investments in and advances to real estate joint ventures
(Notes 2 and 11) 89,499 86,598
------------- -------------
Total real estate development investments $ 105,040 $ 93,691
------------- -------------
PROPERTY AND EQUIPMENT, at cost (Note 1):
Land $ 536 $ 826
Buildings and improvements 11,286 13,026
Construction equipment 7,600 7,580
Other equipment 6,814 8,450
------------- -------------
$ 26,236 $ 29,882
Less - Accumulated depreciation 16,378 19,406
------------- -------------
Total property and equipment, net $ 9,858 $ 10,476
------------- -------------
OTHER ASSETS:
Other investments $ 2,719 $ 3,069
Goodwill (Note 1) 1,450 1,512
------------- -------------
Total other assets $ 4,169 $ 4,581
------------- -------------
$ 378,591 $ 414,924
============= =============
The accompanying notes are an integral part of these consolidated financial
statements.
25
Liabilities and Stockholders' Equity
1998 1997
--------------- --------------
CURRENT LIABILITIES:
Current maturities of long-term debt (Note 3) $ 2,956 $ 11,873
Accounts payable, including retainage of $31,859 and $49,884 127,774 145,118
Advances from construction joint ventures (Note 2) 17,300 29,801
Deferred contract revenue (Note 1) 14,350 17,117
Accrued expenses 39,479 25,515
--------------- --------------
Total current liabilities $ 201,859 $ 229,424
--------------- --------------
DEFERRED INCOME TAXES AND OTHER LIABILITIES (Notes 1, 5 & 6) $ 15,713 $ 28,882
--------------- --------------
LONG-TERM DEBT, less current maturities included above (Note 3) $ 75,857 $ 84,898
--------------- --------------
MINORITY INTEREST (Note 1) $ 1,064 $ 1,064
--------------- --------------
CONTINGENCIES AND COMMITMENTS (Note 11)
REDEEMABLE SERIES B CUMULATIVE CONVERTIBLE PREFERRED
STOCK (Note 7):
Authorized - 500,000 shares
Issued and outstanding - 181,357 shares and 164,300 shares
(aggregate liquidation preferences of $36,271 and $32,860) $ 33,540 $ 29,756
--------------- --------------
STOCKHOLDERS' EQUITY (Notes 1, 3, 7, 8, 9 and 10):
Preferred Stock, $1 par value -
Authorized - 500,000 shares
Designated, issued and outstanding - 100,000 shares of $21.25 Convertible
Exchangeable Preferred Stock ($25,000 aggregate liquidation preference) $ 100 $ 100
Series A junior participating Preferred Stock, $1 par value -
Designated - 200,000
Issued - none - -
Stock Purchase Warrants 2,233 2,233
Common Stock, $1 par value -
Authorized - 15,000,000 shares
Issued - 5,506,341 shares and 5,267,130 shares 5,506 5,267
Paid-in surplus 49,219 53,012
Retained earnings (deficit) (3,642) (15,294)
ESOT related obligations (1,381) (2,663)
--------------- --------------
$ 52,035 $ 42,655
Less - Common Stock in treasury, at cost - 92,694 shares and 110,084 shares 1,477 1,755
--------------- --------------
Total stockholders' equity $ 50,558 $ 40,900
--------------- --------------
$ 378,591 $ 414,924
=============== ==============
26
Consolidated Statements of Operations
For the Years Ended December 31, 1998, 1997 & 1996
(In thousands, except per share data)
1998 1997 1996
---------------- --------------- ----------------
REVENUES (Notes 2 and 13) $ 1,035,900 $ 1,324,491 $ 1,270,284
---------------- --------------- ----------------
COSTS AND EXPENSES (Notes 2 and 10):
Cost of operations $ 984,871 $ 1,275,614 $ 1,215,806
Write down of certain real estate assets (Note 4) - - 79,900
General, administrative and selling expenses 28,780 30,556 33,988
---------------- --------------- ----------------
$ 1,013,651 $ 1,306,170 $ 1,329,694
---------------- --------------- ----------------
INCOME (LOSS) FROM OPERATIONS (Note 13) $ 22,249 $ 18,321 $ (59,410)
---------------- --------------- ----------------
Other income (expense), net (Note 6) (812) (1,665) (492)
Interest expense (Note 3) (8,685) (10,334) (9,871)
---------------- --------------- ----------------
INCOME (LOSS) BEFORE INCOME TAXES